Predictive power of economic-based performance indicators on shareholder value: Evidence from South African listed firms

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Financial statements are often number intensive, and determining the importance and relevance of these numbers from the perspective of investors and equity holders is paramount. However, empirical studies concerning the correlation between several accounting and economic-based indicators with shareholder returns have yielded contradictory results. Additionally, considering the relatively limited studies on economic-based indicators such as refined economic value-added and economic value-added momentum, this study evaluated the predictive power of refined economic value added, economic value-added momentum, and economic value added (economic-based indicators), along with traditional accounting-based indicators such as return on equity and earnings per share on the shareholders' returns. The study employed fixed-effect instrumental variable regression and panel quantile regression techniques to examine 49 non-financial companies listed on the Johannesburg Stock Exchange from 2007 to 2021. Overall, the results showed that economic value added is a significant negative predictor of shareholder returns, while refined economic value-added is a positive determinant. In addition, the refined economic value-added coefficient remains positive, with the impact increasing across the conditional quantiles. This study concludes that refined economic value-added provides a superior and realistic determinant of shareholder value on the Johannesburg Stock Exchange compared to other measures.

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    • Table 1. Correlation matrix
    • Table 2. Determinants of shareholder returns
    • Table 3. Distributional drivers of shareholder returns
    • Conceptualization
      Dinis P. Maculuve
    • Data curation
      Dinis P. Maculuve
    • Formal Analysis
      Dinis P. Maculuve, Adefemi A. Obalade
    • Funding acquisition
      Dinis P. Maculuve
    • Investigation
      Dinis P. Maculuve, Adefemi A. Obalade
    • Methodology
      Dinis P. Maculuve, Adefemi A. Obalade
    • Project administration
      Dinis P. Maculuve, Adefemi A. Obalade
    • Resources
      Dinis P. Maculuve
    • Software
      Dinis P. Maculuve
    • Supervision
      Dinis P. Maculuve, Adefemi A. Obalade
    • Validation
      Dinis P. Maculuve, Adefemi A. Obalade
    • Visualization
      Dinis P. Maculuve, Adefemi A. Obalade
    • Writing – original draft
      Dinis P. Maculuve, Adefemi A. Obalade
    • Writing – review & editing
      Dinis P. Maculuve, Adefemi A. Obalade